Coase's Parable

• Publication year: 2023
• Citation: Vol. 74 No. 3

Coase's Parable

F.E. Guerra-Pujol

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Coase's Parable

F. E. Guerra-Pujol^*

Abstract

Most legal stories are generally about identifying wrongdoers and vindicating the rights of victims, but what if legal wrongs are jointly-caused? It was Ronald Coase who first proposed this novel and unorthodox counter-narrative to the standard victim-wrongdoer story in law. Researching and writing in the late 1950s and early 1960s, Professor Coase—an obscure, middle-aged English economist at the time—revisited a number of leading nuisance cases. Coase then used these old cases to create a compelling but controversial legal counter-narrative: compelling because Coase's parable forever changed the way many economists and lawyers see the law; controversial because harms are conceptualized as a "reciprocal" problem: whenever one party accuses another party of harming them, it is almost always the case that both parties are responsible for the harm—that is the essence of Coase's parable.

I. Introduction

Some stories have heroes and villains.¹ Others involve a voyage, a quest, or a monster to be defeated.² The law is no exception. Most legal stories are about identifying wrongdoers and vindicating the rights of victims, and this standard victim-wrongdoer model not only informs recent developments in legal scholarship, such as feminist jurisprudence³

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or critical race theory;⁴ it also informs our classical liberal tradition.⁵ But what if harms are reciprocal or jointly caused? In other words, what if victims are just as responsible as wrongdoers for their plight?

It was Ronald Coase who first proposed this novel alternative to the standard victim-wrongdoer story in law. Researching and writing in the late 1950s and early 1960s, Professor Coase, an obscure middle-aged English economist at the time, plucked a number of leading cases from the English Law Reports and other sources—classic nuisance cases that he may have first studied in the late 1920s or early 1930s when he was still an undergraduate student at the London School of Economics.⁶ Coase then used these cases to create a compelling but controversial counter-narrative; compelling because Coase's parable forever changed the way many economists, lawyers, and judges see the law, and controversial because harms are conceptualized as a "reciprocal" problem.⁷ Simply put, whenever one party accuses another party of harming them, it is almost always the case that both parties are responsible for the harm—that is the essence of Coase's unorthodox parable.

The remainder of this Article is thus organized as follows: Part II will step away from the law to look at the larger literary picture: what do all stories have in common? Next, Part III of this Article applies the storytelling taxonomy developed in Part II to three of the most well-known works of legal scholarship ever published: "The Right to Privacy,"⁸ "The Path of the Law,"⁹ and "The Problem of Social Cost."¹⁰

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These three works are not only the most cited law review articles of all time;¹¹ they also depart from the standard victim-wrongdoer narrative in law.

Part IV then describes how Ronald Coase ended up creating a new type of legal narrative through his analysis of "four actual cases" in his social cost paper,¹² while Part V concludes with the crown jewel of Coase's counter-narrative: Coase's cattle trespass story,¹³ a simple pastoral parable that has since become one of the most famous legal narratives in academic circles.¹⁴ The conclusion sketches out some possible moral and political implications of Coase's controversial but compelling story.¹⁵

II. Booker's Literary Taxonomy

A story is a series of events¹⁶ that can be told in many different ways and in myriad media,¹⁷ but what do all good stories have in common? Among the plethora of books devoted to the craft of storytelling,¹⁸ the work of Christopher Booker (1937-2019), a British private eye journalist who wrote a weekly column for The Telegraph,¹⁹ is worth pointing out. In summary, Booker identified seven types of stories in his monumental work The Seven Basic Plots.²⁰ Using a wealth of examples—from the myths of ancient Greece to the plays of Shakespeare, from the folk tales of yore to the popular TV shows and movies of today—Booker shows that there are seven archetypal themes that recur in every kind of

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storytelling.²¹ In brief, Booker's reductionist but intriguing taxonomy consists of the following seven standard story sequences:

Overcoming the monster²² The protagonist—the hero or heroine of the story or "H" for short—sets out to defeat an evil force.
Rags to riches²³ H acquires power, wealth, or a mate (or all three), loses it all, and then ends up on top.
The quest²⁴ H sets out to acquire an important object or to get to a location but must confront many temptations or other obstacles along the way.
Voyage and return²⁵ H goes to a strange land and, after learning important lessons unique to that location, returns wiser.
Comedy²⁶ H finds himself entangled in a perplexing situation but is somehow, against all odds, able to get the girl (or vice versa).
Tragedy²⁷ H suffers from a character flaw that is ultimately his undoing.
Rebirth²⁸ An external event or threat leads H to change his ways and become a better person.

Although I am generally highly skeptical of all such reductionist projects, including Booker's, his taxonomy nevertheless intrigues me because of my background in law.²⁹ over the years, I have heard countless times how the practice of law is similar to storytelling.³⁰ If this

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comparison between the practice of law and storytelling is true, and law is ultimately about telling stories, then what type of stories do lawyers and judges and law professors like to tell?

III. Three Legal Narratives

How does Booker's sevenfold taxonomy apply to legal narratives?³¹ This Article will explore this question through three of the most influential and most cited law review essays of all time:³² "The Right to Privacy"³³ by Samuel Warren and Louis Brandeis (1890), "The Path of the Law"³⁴ by Oliver Wendall Holmes (1897), and "The Problem of Social Cost"³⁵ by Ronald Coase (1960).

In general, writing about the law is like writing an adapted screenplay for a Hollywood movie studio.³⁶ Legal scholars take pre-existing materials—such as case law, statutes, and other law review articles—and weave them into a compelling narrative. But what makes the three articles mentioned above so special is that these three classic and

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oft-cited articles depart from the standard victim-wrongdoer narrative in law.

A. The Quest for Autonomy in "The Right to Privacy"

Samuel Warren and Louis Brandeis's begin their famous article "The Right to Privacy"³⁷ by telling the following quest-like epic:

That the individual shall have full protection in person and in property is a principle as old as the common law; but it has been found necessary from time to time to define anew the exact nature and extent of such protection. Political, social, and economic changes entail the recognition of new rights, and the common law, in its eternal youth, grows to meet the demands of society. Thus, in very early times, the law gave a remedy only for physical interference with life and property, for trespasses vi et armis. Then the "right to life" served only to protect the subject from battery in its various forms; liberty meant freedom from actual restraint; and the right to property secured to the individual his lands and his cattle. Later, there came a recognition of man's spiritual nature, of his feelings and his intellect. Gradually the scope of these legal rights broadened; and . . . the term "property" has grown to comprise every form of possession—intangible, as well as tangible.³⁸

What is most remarkable about this quest story is its historical sweep, for the protagonist or hero of Warren and Brandeis's story is not a person.³⁹ It is the common law, a massive body of Anglo-American legal precedents going back centuries.⁴⁰ This body of judge-made law has been the subject of many scholarly studies, from Sir William Blackstone's four-volume Commentaries on the Laws of England⁴¹ to Oliver Wendell Holmes's 1881 book The Common Law;⁴² but Warren and Brandeis were the first to cast the common law as an actual hero, a protagonist on an epic, never-ending ethical quest: the pursuit of human autonomy or "the full protection in person and in property" of every individual.⁴³

Moreover, this story is so captivating and compelling that Warren and Brandeis's privacy article is one of the few works of legal scholarship to

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have actually changed the law.⁴⁴ Today, judges in the United States generally recognize four types of privacy harms or privacy invasions, including intrusion into one's private life and affairs, public disclosure of embarrassing private facts, false light, and misappropriation of one's name or likeness for financial advantage.⁴⁵

Samuel Warren and Louis Brandeis thus told a cogent and compelling story in their classic article on the right to privacy, but is their story true? After all, autonomy is not the only ethical or moral value embodied in the law.⁴⁶ The great Oliver Wendell Holmes, writing seven years later, would tell a much different tale about the common law.⁴⁷

B. Intellectual Rebirth in "The Path of the Law"

Although Samuel Warren and Louis Brandeis's article "The Right to Privacy"⁴⁸ can be read as a quest narrative, another famous law review article—"The Path of the Law"⁴⁹ by Oliver Wendell Holmes—paints a very different picture of law.⁵⁰ For Holmes, the law is not about autonomy or some other teleological goal; it is first and foremost about making accurate predictions on the outcomes of court cases: "The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law."⁵¹ In support of his predictive theory of law, Holmes

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conjures up one of the most enduring...